HudBay Minerals Inc. struggling with resistance

Mar 28th, 2012 – 2 Comments

At this point I would say that we need more evidence that the stock is ready to move higher.


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Hi Lou,
I read your comments every week. They are very good.
Can you give us your take of HBM?
Thanks,
Vincent

 

Hey Vincent,

The last time I ran the charts for HudBay Minerals Inc. (HBM TSX) was May 12, 2010 on an assignment from Norm. What he wanted to know was if the stock was a good candidate for a short. I agreed with him that the shares had the potential to move lower but to be cautious. The shares were trading at $11.41 and did pull back to $10.00 by the end of May 2010 but that was the end of the downtrend. From there HBM began a spectacular uptrend that pushed the value to $19.00 by the end of 2010. That however was the top and so began a reversal that set up a big short all the way down to $9.00 by late 2011. The round trip, long and short, created a lot of wealth for investors who interpreted the signals correctly.

Another review of the charts will provide greater substance to your decision-making.

 

 

The three -year chart indicates that the downtrend that started in December of 2010 broke as we came into 2012. Over the first three months of this year HBD enjoyed a run to the upside that hit resistance at $12.25. From the October 2011 low of $9.14 that is a healthy 34.02% gain. There has been a pullback that is testing support at $11.00 and that is where we should focus some attention.

 

 

 

 

 

The six- month chart depicts a double bottom that has surfaced at $11.00, which suggests it could be setting up a reversal of the selling that started in late February. However there also appears to be a descending triangle forming and there are no signals emanating from the RSI or the MACD to support a buy. At this point I would say that we need more evidence that the stock is ready to move higher. The company is expected to report Q1 2012 on May 4, which will provide a milestone we can track progress against. Best-case scenario HBM catches a bounce off $11.00 and moves through resistance along the 200-day moving average with conviction. But we don’t always get the best case.

 

Make it a profitable day and happy capitalism!

 

 

 

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